BENGALURU, Sept 19 (Reuters) - Gold prices rose on Wednesday along with equities as the U.S. dollar softened, with markets showing little worry over the latest escalation in the U.S.-China trade war.

Spot gold climbed 0.4 percent to $1,202.32 an ounce by 0656 GMT.

U.S. gold futures were up 0.3 percent at $1,207 an ounce.

China and the United States plunged deeper into their trade feud on Tuesday after Beijing added $60 billion in U.S. products to its import tariff list in retaliation for President Donald Trump’s planned levies on $200 billion in Chinese goods.

“The U.S. decision to impose a 10 percent tariff – as opposed to a 25 percent one (expected) – has encouraged investors in the sense there could be hope for a future compromise on trade,” said John Sharma, an economist at National Australia Bank.

Gold prices have declined about 12 percent since April, hurt by the intensifying U.S.-China trade dispute and on rising U.S. interest rates.

Investors have been buying the dollar in the belief the United States has less to lose from the dispute. But a spot of weakness in the dollar may indicate investors are starting to worry about the impact of the tariffs on the U.S. economy.

“It appears that investors are beginning to view tariffs - while likely negative for China’s exports - could also prove detrimental to the United States as well, given the disruptive impact on global supply chains,” Sharma said.

The dollar index, which measures the greenback against a basket of major currencies, was down 0.1 percent.

“People are following the U.S. dollar and looking for clues from the upcoming Federal Reserve meeting later this month,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

Bond traders are increasing bets that the Federal Reserve will raise U.S. short-term interest rates into 2019 as the jobs market tightens and with inflation seen climbing above its 2 percent goal.

Spot gold may retest a resistance at $1,202 per ounce, with a good chance of breaking above this level and rising towards $1,208, according to Reuters technical analyst Wang Tao.

“For the short and medium-term, gold is likely to trade range bound between $1,190-$1,210. There is some physical demand in Shanghai and Hong Kong,” Fung said.

Meanwhile, liquidations in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, continued as holdings fell 0.3 tonnes to 742.23 tonnes on Tuesday.

Among other precious metals, spot silver rose 0.4 percent to $14.18 an ounce.

Platinum gained 0.6 percent to $814.49, after hitting its highest since Aug. 13 at $820.20 earlier in the session.

Palladium was up 0.2 percent at $1,011.75, after marking its highest since June 14 at $1,015.50. (Reporting by Vijaykumar Vedala and Nallur Sethuraman in BENGALURU; Editing by Tom Hogue and Gopakumar Warrier)